2012-10-25 08:00:00 CEST
2012-10-25 08:02:50 CEST
REGULATED INFORMATION
Outotec Oyj - Interim report (Q1 and Q3)
Outotec's Interim Report January-September 2012
OUTOTEC OYJ INTERIM REPORT OCTOBER 25, 2012 AT 9.00 AM
INTERIM REPORT JANUARY-SEPTEMBER 2012
Strong sales growth and improved profitability, upgraded sales guidance for 2012
Reporting period January-September 2012 in brief (2011)
* Order intake: EUR 1,613.2 million (EUR 1,678.4 million), -4%
* Order backlog: EUR 2,155.8 million (EUR 2,052.5 million), +5%
* Sales: EUR 1,437.6 million (EUR 888.8 million), +62%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 119.8 million, 8.3% of
sales (EUR 66.6 million, 7.5% of sales), +80%
* Net cash flow from operating activities: EUR 80.4 million (EUR 225.8
million), -64%
* Earnings per share: EUR 1.66 (EUR 0.93), +78%
July-September 2012 in brief (2011)
* Order intake: EUR 452.4 million (EUR 802.7 million), -44%
* Sales: EUR 502.8 million (EUR 352.8 million), +43%
* Operating profit from business operations (excluding one-time items and
purchase price allocation (PPA) amortizations): EUR 44.7 million, 8.9% of
sales (EUR 34.3 million, 9.7% of sales), +30%
* Net cash flow from operating activities: EUR 13.4 million (EUR 120.1
million), -89%
Revised financial guidance for 2012
Based on the first nine months' financial performance, strong order backlog at
the end of September, execution of CAPEX projects and market outlook, the
management expects that in 2012:
* sales will grow to approximately EUR 1.9-2.1 billion, especially driven by
the project revenue recognition, and
* operating profit margin from business operations will be approximately
9-10% (excluding one-time items and PPA amortizations).
Achieving the guidance is subject to the sales mix and relative share of
Services, fluctuation in foreign exchange rates, project progress in the order
backlog, timing of new orders, license fee income and project completions as
well as the general development of the world economy and financial markets.
Previous financial guidance for 2012
Based on the reporting period's financial performance, strong order backlog at
the end of June, market outlook and customer tendering activity, the management
expects that in 2012:
* sales will grow to approximately EUR 1.8-2.0 billion, especially driven by
the project revenue recognition, and
* operating profit margin from business operations will be approximately
9-10% (excluding one-time items and PPA amortizations).
Achieving the guidance is subject to the sales mix and relative share of
Services, fluctuation in foreign exchange rates, project progress in the order
backlog, timing of new orders, license fee income and project completions as
well as the general development of the world economy and financial markets.
President and CEO Pertti Korhonen:"The market continued to be active in the third quarter of 2012. Matters such as
social responsibility and environmental sustainability are increasingly high on
the agenda of our customers creating demand for our sustainable technology
solutions. The demand in most metals continued to be strong; however, in iron
ore the decision-making for new investments has been slower. In the third
quarter of 2012, our order intake remained solid and we were able to win both
greenfield and brownfield orders. We have achieved over 60% sales growth this
year because of successful deliveries from the high order backlog and services
business growth. Strong sales growth and our ability to scale our business
improved our operating profit. To expand our services offering, we acquired TME
Group to strengthen our grinding mill relining and mineral processing plant
maintenance services.
I am pleased that the first three quarters in 2012 have been very successful and
that we have been able to scale and grow our business and continue to improve
our profitability. The outlook for 2012 is solid and our focus is on expanding
our addressable market, increasing our market share as well as improving
profitability in 2013 and beyond. Although there is solid demand for more
efficient and environmentally sound processing solutions and need to increase
processing capacity, current macro-economic uncertainties may cause our
customers to delay their investment decisions."
Summary of key figures Q3 Q3 Q1-Q3 Q1-Q3 Last 12 Q1-Q4
2012 2011 2012 2011 months 2011
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Sales, EUR million 502.8 352.8 1,437.6 888.8 1,934.4 1,385.6
Gross margin, % 19.3 24.9 20.3 24.0 21.2 24.0
Operating profit from business
operations, EUR million 44.7 34.3 119.8 66.6 174.7 121.5
Operating profit from business
operations, % 8.9 9.7 8.3 7.5 9.0 8.8
Operating profit, EUR million 41.0 33.2 109.4 63.0 158.3 111.9
Operating profit margin, % 8.1 9.4 7.6 7.1 8.2 8.1
Profit before taxes, EUR
million 39.6 33.3 107.4 62.5 158.2 113.3
Net cash from operating
activities, EUR million 13.4 120.1 80.4 225.8 101.6 247.0
Net interest-bearing debt at
the
end of period, EUR million -301.4 -356.7 -301.4 -356.7 -301.4 -339.1
Gearing at the end of period,
% -69.8 -101.6 -69.8 -101.6 -69.8 -84.9
Working capital at the end of
period, EUR million -244.4 -269.6 -244.4 -269.6 -244.4 -270.3
Return on investment, % 34.3 34.6 31.0 21.8 35.1 26.4
Return on equity, % 26.6 25.5 24.2 15.9 28.7 20.9
Order backlog at the end of
period, EUR million 2,155.8 2,052.5 2,155.8 2,052.5 2,155.8 1,985.1
Order intake, EUR million 452.4 802.7 1,613.2 1,678.4 1,940.2 2,005.4
Personnel, average for the
period 4,663 3,610 4,356 3,420 4,218 3,516
Earnings per share, EUR 0.62 0.48 1.66 0.93 2.48 1.75
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INTERIM REPORT JANUARY-SEPTEMBER 2012
OPERATING ENVIRONMENT
For the reporting period, the overall market activity was good in most of
Outotec's market areas. The long-term outlook for metals demand continues to be
positive, driving investments to new capacity. Though some mining companies have
announced revised investment plans, there has not been material change in the
demand for Outotec's processing solutions, with the exception of the iron ore
value chain, where some large iron ore greenfield and large modernization
investments advanced slowly due to market uncertainty and lower iron ore prices
in line with weakened steel demand. In addition to the greenfield projects,
customers are seeking additional operational improvements through expansion and
modernization of existing processing capacity. Outotec's customer project
deliveries progressed well in line with the plans and there were no
cancellations or postponements of existing orders. Activity continued to be high
in copper, gold, acid, and aluminum markets. Zinc market activity increased.
Generally, customers' capacity utilization rates stayed high, supporting service
sales. The competitive landscape remained relatively unchanged with continued
industry consolidation.
Despite continued macro-economic uncertainties, investment financing for solid
projects continued to be available for Outotec's customers. However, tighter
environmental permitting and the complexity of financing packages slowed down
sales negotiations in some projects. Furthermore, in certain regions,
uncertainties and delays in political regulation slowed down investment
decisions especially in alternative energy solutions.
ORDER INTAKE
Order intake (including plant, technology and equipment deliveries as well as
services) in the reporting period totaled EUR 1,613.2 million (Q1-Q3/2011: EUR
1,678.4 million), a 4% decrease from the high comparison period. Orders from
EMEA (Europe including the CIS, Middle East and Africa) represented 57%,
Americas 27%, and Asia Pacific 16% of the total order intake. Orders received in
the third quarter totaled EUR 452.4 million (Q3/2011: EUR 802.7 million), which
was 44% lower than in the all-time-high comparison period.
Published orders in the third quarter:
* Copper and molybdenum technologies for National Iranian Copper Industries,
Iran (total value EUR 265 million with 58 million booked in Q3 order
intake)
* Alumina technology for Orbite Aluminae, Canada (value not disclosed)
* Copper smelter modernization for Mexicana de Cobre, Mexico (value approx.
EUR 30 million)
* Technology for nickel matte treatment facility for Enerchem, South Korea
(value over EUR 10 million)
* Technology and proprietary equipment for aluminum smelters and related
industry, China (value approx. EUR 24 million)
* Flotation technology for copper concentrator expansion, South America (value
over EUR 30 million)
Published orders in the second quarter:
* llmenite smelter for Cristal Global, Saudi Arabia (value over EUR 350
million)
* Solvent extraction and electrowinning technology for Grupo México, Mexico
(value approx. EUR 22 million)
* Iron ore sintering technology for BPSL, India (value approx. EUR 20
million)
* Filtration technology for MMX Mineração e Metálicos, Brazil (value some tens
of millions of EUR)
* Filtration technology for lithium processing pilot plant for Corporación
Minera de Bolivia, Bolivia (some millions of EUR)
* Flotation technology for Kennecott Utah Copper concentrator, U.S. (value not
disclosed, booked in Q1 order intake)
* Iron ore pelletizing plant for Gol-E-Gohar Mining & Industrial, Iran (value
approx. EUR 80-85 million with EUR 25 million booked in Q2 order intake)
Published orders in the first quarter:
* Concentrator technology for a slag treatment plant for Codelco, Chile (value
some EUR 10 million)
* Gas cleaning system and a sulfuric acid plant for Kansanshi Mining, Zambia
(value over EUR 80 million)
* Copper concentrator technology for Grupo México, Mexico (value nearly EUR
28 million)
* Feasibility study for a smelter-grade alumina refinery for PT ANTAM
(Persero), Indonesia
ORDER BACKLOG
The order backlog at the end of the reporting period was EUR 2,155.8 million
(September 30, 2011: EUR 2,052.5 million), up 5% from the comparison period. At
the end of the reporting period, Outotec had 43 projects with an order backlog
value in excess of EUR 10 million, accounting for 70% of the total backlog.
Based on the quarter-end project evaluation, management estimates that roughly
27% (approximately EUR 580 million) of the September-end order backlog value
will be delivered in 2012 and the rest in 2013 and beyond.
SALES AND FINANCIAL RESULT
Outotec's sales in the reporting period totaled EUR 1,437.6 million (Q1-Q3/2011:
EUR 888.8 million), up 62% from the comparison period. Sales growth resulted
from successful project delivery, a strong opening order backlog, new plant,
technology and equipment orders, as well as services sales growth. Foreign
exchange rates did not have material effect on sales growth. Sales in the third
quarter of 2012 totaled EUR 502.8 million (Q3/2011: EUR 352.8 million), up 43%
from the comparison period.
Sales in the Services business area, which is included in the sales figures of
the three reporting segments, totaled EUR 291.9 million in the reporting period
(Q1-Q3/2011: EUR 234.4 million), up 25% from the comparison period and
accounting for 20% of Outotec's sales (Q1-Q3/2011: 26%). Sales in the Services
business area in the third quarter of 2012 totaled EUR 101.7 million (Q3/2011:
EUR 87.7 million), up 16% from the comparison period and accounting for 20% of
Outotec's sales (Q3/2011: 25%).
Operating profit from business operations in the reporting period was EUR 119.8
million (Q1-Q3/2011: EUR 66.6 million), up 80% from the comparison period and
representing 8.3% of sales (Q1-Q3/2011: 7.5%). The operating profit in the
reporting period increased due to higher sales and successful project
completions. The operating profit margin was impacted by unrealized and realized
exchange losses of EUR 0.2 million (Q1-Q3/2011: gain of EUR 2.3 million) related
to currency forward contracts, a lower share of service sales, higher than
planned costs and increased risk provisions in two customer projects. Operating
profit for the reporting period was EUR 109.4 million (Q1-Q3/2011: EUR 63.0
million), representing 7.6% of sales (Q1-Q3/2011: 7.1% of sales). The total
impact of PPA amortizations in the reporting period was EUR 9.2 million (Q1-
Q3/2011: EUR 3.6 million). The increase in the PPA amortizations primarily
resulted from the Energy Products of Idaho and Kiln Services Australia
acquisitions in December 2011. In 2012, the total impact for PPA amortizations
from completed acquisitions is estimated to be approximately EUR 12 million.
One-time costs which were related to acquisition costs were EUR 1.3 million (Q1-
Q3/2011: no one-time costs) in the reporting period.
Operating profit from business operations in the third quarter of 2012 was EUR
44.7 million (Q3/2011: EUR 34.3 million), representing 8.9% of sales (Q3/2011:
9.7%), and operating profit was EUR 41.0 million (Q3/2011: EUR 33.2 million),
representing 8.1% of sales (Q3/2011: 9.4%). Operating profit from business
operations in the third quarter of 2012 was impacted by higher than planned
costs and increased risk provisions in two projects as well as fewer project
completions than in the comparison period. Unrealized and realized exchange
gains related to currency forward contracts in the third quarter of 2012 were
EUR 3.6 million (Q3/2011: loss of EUR 2.5 million). The impact of PPA
amortizations in the third quarter operating profit was EUR 3.2 million
(Q3/2011: EUR 1.2 million).
Fixed costs in the reporting period were EUR 180.7 million (Q1-Q3/2011: EUR
153.1 million). The increase was primarily due to continued investments in
selling and marketing, acquisitions, R&D activities as well as in developing and
deploying the company's global operational model in line with the strategy.
Profit before taxes in the reporting period was EUR 107.4 million (Q1-Q3/2011:
EUR 62.5 million). It included net finance expenses of EUR 1.9 million (Q1-
Q3/2011: net finance expenses EUR 0.5 million). Net profit for the reporting
period was EUR 75.5 million (Q1-Q3/2011: EUR 42.3 million). Taxes totaled EUR
31.9 million (Q1-Q3/2011: EUR 20.2 million). Earnings per share were EUR 1.66
(Q1-Q3/2011: EUR 0.93), up 78%.
Outotec's return on equity for the reporting period was 24.2% (Q1-Q3/2011:
15.9%), and the return on investment was 31.0% (Q1-Q3/2011: 21.8%).
Sales and Operating Profit by Segment Q3 Q3 Q1-Q3 Q1-Q3 Q1-Q4
EUR million 2012 2011 2012 2011 2011
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Sales
Non-ferrous Solutions 312.5 235.5 909.0 588.9 947.6
Ferrous Solutions 92.9 60.0 244.7 146.3 221.1
Energy, Light Metals and Environmental 100.1 61.4 292.8 165.2 236.1
Solutions
Unallocated items*) and intra-group sales -2.7 -4.1 -9.0 -11.5 -19.2
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Total 502.8 352.8 1,437.6 888.8 1,385.6
Operating profit
Non-ferrous Solutions 33.7 24.6 94.1 55.3 107.7
Ferrous Solutions 9.9 6.0 17.5 7.3 6.7
Energy, Light Metals and Environmental 0.6 11.7 11.7 20.2 23.8
Solutions
Unallocated**) and intra-group items -3.2 -9.1 -14.0 -19.9 -26.3
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Total 41.0 33.2 109.4 63.0 111.9
*) Unallocated items primarily include invoicing of group management and
administrative services.
**) Unallocated items primarily include group management and administrative
services.
Non-ferrous Solutions
Sales in the Non-ferrous Solutions business area in the reporting period totaled
EUR 909.0 million (Q1-Q3/2011: EUR 588.9 million), up 54% from the comparison
period. The increase was due to good progress in deliveries from the order
backlog, continued strong order intake, and growth in Services sales. The
operating profit from business operations in the reporting period was EUR 97.1
million, 10.7% of sales (Q1-Q3/2011: EUR 58.6 million, 9.9% of sales), and
operating profit was EUR 94.1 million, 10.4% of sales (Q1-Q3/2011: EUR 55.3
million, 9.4% of sales). Operating profit was improved due to operating leverage
resulting from higher sales and good performance in project deliveries. The
unrealized and realized exchange gains related to currency forward contracts
increased profitability by EUR 1.0 million (Q1-Q3/2011: gain of EUR 1.0
million).
In the third quarter of 2012, sales were EUR 312.5 million (Q3/2011: EUR 235.5
million), operating profit from business operations was EUR 34.8 million, 11.1%
of sales (Q3/2011: EUR 25.7 million, 10.9% of sales), and operating profit EUR
33.7 million, 10.8% of sales (Q3/2011: EUR 24.6 million, 10.5% of sales). The
unrealized and realized exchange gains related to currency forward contracts
increased profitability by EUR 2.0 million (Q3/2011: loss of EUR 3.1 million).
Ferrous Solutions
Sales in the Ferrous Solutions business area for the reporting period totaled
EUR 244.7 million (Q1-Q3/2011: EUR 146.3 million), up 67% from the comparison
period. The increase was due to the successful execution of long-term projects
from the backlog and growth in Services sales. Operating profit from business
operations in the reporting period was EUR 18.4 million, 7.5% of sales (Q1-
Q3/2011: EUR 7.3 million, 5.0% of sales) and operating profit was EUR 17.5
million, 7.2% of sales (Q1-Q3/2011: EUR 7.3 million, 5.0% of sales). Operating
profit improved due to operating leverage resulting from higher sales as several
large projects were in the active delivery phase.
In the third quarter of 2012, sales were EUR 92.9 million (Q3/2011: EUR 60.0
million). Operating profit from business operations was EUR 10.2 million, 11.0%
of sales (Q3/2011: EUR 6.0 million, 10.0% sales), and operating profit EUR 9.9
million, 10.7% of sales (Q3/2011: EUR 6.0 million, 10.0% of sales).
Energy, Light Metals and Environmental Solutions
Sales in the Energy, Light Metals and Environmental Solutions business area in
the reporting period totaled EUR 292.8 million (Q1-Q3/2011: EUR 165.2 million),
up 77% from the comparison period. The increase was due to the good progress in
the execution of long-term projects, acquisitions, and growth in Services sales.
Operating profit from business operations for the reporting period was EUR 18.2
million, 6.2% of sales (Q1-Q3/2011: EUR 20.6 million, 12.5% of sales) and
operating profit was EUR 11.7 million, 4.0% of sales (Q1-Q3/2011: EUR 20.2
million, 12.3% of sales). Operating profit from business operations in the
reporting period decreased due to higher than planned costs and increased risk
provisions in two customer projects as well as fewer project completions
compared to the comparison period. In addition, unrealized and realized exchange
losses of EUR 1.0 million (Q1-Q3/2011: gain of EUR 1.4 million) related to
currency forward contracts impacted on profitability.
In the third quarter of 2012, sales were EUR 100.1 million (Q3/2011: EUR 61.4
million), operating profit from business operations was EUR 2.8 million, 2.8% of
sales (Q3/2011: EUR 11.7 million, 19.1% of sales), and operating profit EUR 0.6
million, 0.6% of sales (Q3/2011: EUR 11.7 million, 19.0% of sales). The
unrealized and realized exchange gains related to currency forward contracts
increased profitability by EUR 1.1 million (Q3/2011: gain of EUR 0.7 million).
BALANCE SHEET, FINANCING, AND CASH FLOW
The consolidated balance sheet total was EUR 1,602.5 million at the end of the
reporting period (September 30, 2011: EUR 1,295.2 million). The equity to
shareholders of the parent company was EUR 430.2 million (September 30, 2011:
EUR 350.2 million), representing EUR 9.56 (September 30, 2011: EUR 7.71) per
share.
The net cash flow from operating activities in the reporting period was EUR
80.4 million (Q1-Q3/2011: EUR 225.8 million). The reporting period's net cash
flow from operating activities was decreased from the comparison period due
increased inventory levels related to business growth as well as fewer large
advance payments. Gearing for the reporting period was -69.8% (September
30, 2011: -101.6%).
Outotec's working capital amounted to EUR -244.4 million at the end of the
reporting period (September 30, 2011: EUR
-269.6 million). The advance and milestone payments received at the end of the
reporting period were EUR 424.6 million (September 30, 2011: EUR 401.0 million),
representing an increase of 6% from the comparison period. The advance and
milestone payments paid at the end of the reporting period were EUR 63.1 million
(September 30, 2011: EUR 38.9 million).
At the end of the reporting period, Outotec's cash and cash equivalents totaled
EUR 364.3 million (September 30, 2011: EUR 423.9 million). Cash and cash
equivalents was affected by the dividend payment of EUR 38.9 million (EUR 0.85
per share) on April 11, 2012 (April 2011: EUR 34.3 million), acquisitions EUR
29.1 million (Q1-Q3/2011: no acquisitions), and purchases of own shares EUR
19.3 million (Q1-Q3/2011: no purchases). The company invests excess cash in
short-term money market instruments such as bank deposits and corporate
commercial certificates of deposit.
The European Investment Bank has granted in September 2012 a EUR 45 million loan
to Outotec to finance research and development programs in sustainable minerals
and metallurgical processing technologies as well as industrial water treatment
and energy-related applications. The repayment period is up to 11 years. Outotec
had EUR 195 million of committed undrawn credit facilities available at the end
of the reporting period.
Outotec's financing structure continued to be strong and liquidity was good. Net
interest-bearing debt at the end of the reporting period was EUR -301.4 million
(September 30, 2011: EUR -356.7 million). Outotec's equity-to-assets ratio was
36.6% (September 30, 2011: 39.3%). The company's capital expenditure in the
reporting period was EUR 48.4 million (Q1-Q3/2011: EUR 23.4 million) including
acquisitions as well as investments in IT systems, R&D-related equipment, and
intellectual property rights.
At the end of the reporting period, guarantees for commercial commitments,
including advance payment guarantees issued by the parent and other Group
companies, were EUR 568.6 million (September 30, 2011: EUR 450.7 million).
CORPORATE STRUCTURE
On August 31, 2012, Outotec completed the acquisition of Australian-owned TME
Group. TME is a mining services company, headquartered in Western Australia and
provides grinding mill relining and mineral processing plant maintenance
services to customers mainly in Australia, Africa, and South East Asia.
On June 1, 2012, Outotec completed the acquisition of Demil Manutenção
Industrial Ltda. The Brazilian company provides industrial maintenance services
for iron ore agglomeration plants, and is located in Guarapari, Espírito Santo.
On March 12, 2012, Outotec acquired all of the shares in Numcore Ltd, which is a
technology company that develops and markets innovative online process control
solutions based on 3D imaging.
In 2012, the total impact for PPA amortizations from completed acquisitions is
estimated to be approximately EUR 12 million.
RESEARCH AND TECHNOLOGY DEVELOPMENT
In the reporting period, Outotec's research and technology development expenses
totaled EUR 29.3 million (Q1-Q3/2011: EUR 22.7 million), increasing 29% from the
comparison period and representing 2.0% of sales (Q1-Q3/2011: 2.6%). Outotec
filed 45 new priority patent applications (Q1-Q3/2011: 28), and 219 new national
patents were granted (Q1-Q3/2011: 223). At the end of the reporting period,
Outotec had 610 patent families, including a total of 5,618 national patents or
patent applications.
In September, Outotec launched the world's largest semi-autogenous (SAG)
grinding mill to the market in response to growing metals demand and declining
ore grades. The mill is driven by a 28 MW Gearless Motor Drive, which is the
largest grinding mill power ever used in the mining industry. The SAG mill
design is based on Outotec's proprietary technology. It offers increased
efficiency and up to 15% larger mill capacity with low energy consumption.
In September, Outotec and Sandvik Mining announced cooperation in minerals
processing solutions. This enables Outotec to offer an entire processing plant,
including crushing, grinding and concentrating as well as process testing,
design, basic engineering and process guarantees.
In April, Outotec launched the world's largest flotation cell, the Outotec
TankCell® e500. It has been designed for plants with high material throughputs,
such as large copper and gold concentrators. Outotec offers the broadest size
range of flotation cells on the market (from 5 m³ to 500 m³), which allows for a
flexible layout with symmetrical design. The benefits include lower equipment
costs and energy consumption, less installation work, and a smaller plant
footprint. Fewer units per installation result in fewer components, spare parts,
and less maintenance.
In April, Outotec received exclusive rights from Swiss Tower Mills Minerals Ltd
to distribute and sell its Tower Mills (STM) grinding technology. High-intensity
grinding mills marketed as Outotec® HIGmill bring a new option to the market,
enabling Outotec to compete for the position of market leader in fine and ultra-
fine grinding.
Based on the cooperation agreement with the Ministry of Minerals Resources and
Energy of Mongolia, Outotec organized in Finland together with Aalto University
a training course in Minerals Engineering and Metallurgy for Mongolian Bachelor
of Science Graduates and professors.
Outotec is providing a continuously processing Minipilot Plant for ore
beneficiation for the Oulu Mining School at the University of Oulu. The
minipilot has a scale of 1:5000 and it is based on the Pyhäsalmi Mine's
beneficiation process. The pilot equipment is based on Outotec's technologies
and it gives a close to authentic education and research environment for the
minerals processing scientists and students of Oulu Mining School.
In March, Outotec launched the Outotec® Larox PF 180, the world's largest
pressure filter. The PF 180 series are 50% larger than the previous model and
lowering operating cost per ton.
SUSTAINABILITY
In September, Outotec hosted a seminar in Indonesia for customers, partners,
ministries, industry associations, and academics on the implementation of a
framework for sustainability in the Indonesian mining and metals processing
industries. The seminar was organized jointly with the Indonesian Ministry of
Environment. Outotec presented sustainable solutions and environmental
considerations in minerals and metals processing as well as trends in
environmental legislation in Europe.
In April, Outotec published its sustainability report for 2011, which is based
on the Global Reporting Initiative (GRI) guidelines. The report conforms to
Application Level B+ and is third-party assured by Ecobio Ltd.
PERSONNEL
At the end of the reporting period, Outotec had a total of 4,662 employees
(September 30, 2011: 3,667). New employees were primarily recruited for project
deliveries and for the service business. In addition, acquisitions increased
personnel from the comparison period by 435. In the reporting period, Outotec
had on average 4,356 employees (Q1-Q3/2011: 3,420). The average number of
personnel grew by 936 compared to the comparison period, which supports overall
business growth objectives. Temporary personnel accounted for approximately 8%
(Q1-Q3/2011: 9%) of the total number of employees.
Distribution of Personnel by Region Sep 30, Sep 30, change Dec 31,
2012 2011 % 2011
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EMEA (including CIS) 2,565 2,237 14.6 2,327
Americas 1,372 881 55.7 972
Asia Pacific 725 549 32.1 584
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Total 4,662 3,667 27.1 3,883
At the end of the reporting period, the company had, in addition to its own
personnel, approximately 800 (September 30, 2011: 480) full-time equivalent,
contracted professionals working in project execution. The number of contracted
workers at any given time changes with the active project mix and project
commissioning, local legislation, and regulations as well as seasonal
fluctuations.
In the reporting period, salaries and other employee benefits totaled EUR 252.2
million (Q1-Q3/2011: EUR 202.0 million). The increase from the comparison period
was due to personnel additions, wage inflation, and wage increases.
SHARE-BASED INCENTIVE PROGRAM AND SHARE SAVINGS PLAN
Share-based incentive program
Outotec's board of directors decided on April 23, 2010 to adopt a share-based
incentive program 2010-2012 for the company's key personnel.
Earning period 2010
A total of 138,144 Outotec shares were allocated for the 2010 earning period
with a cost of approximately EUR 9.6 million, which is booked for the financial
periods 2010-2012.
Earning period 2011
A total of 130,063 Outotec shares were allocated for the 2011 earning period
with a cost of approximately EUR 9.5 million, which is booked for the financial
periods 2011-2013.
Earning period 2012
The board of directors approved (March 28, 2012) 148 individuals for the
program's 2012 earning period and set targets for order intake, earnings per
share and sales growth. The maximum total reward for the 2012 earning period,
depending on the achievement of set targets, is 195,875 allocated Outotec shares
and cash to cover income taxes.
Employee share savings plan
Outotec's board of directors decided on September 25, 2012, to launch an
employee share savings plan for Outotec employees globally. The plan will
commence from January 1, 2013, with the first savings period being one calendar
year. The following savings periods are subject to a separate board decision.
SHARES AND SHARE CAPITAL
Outotec's shares are listed on the NASDAQ OMX Helsinki (OTE1V). At the end of
the reporting period, Outotec's share capital was EUR 17,186,442.52, consisting
of 45,780,373 shares. Each share entitles its holder to one vote at the
company's general shareholders' meetings. At the end of the reporting period,
the company holds a total of 564,327 Outotec shares.
Board authorizations
The annual general meeting for 2012 authorized Outotec's board of directors to
determine the repurchase of the company's own shares, and to issue new shares.
The maximum number of shares related to both authorizations is 4,578,037. The
authorizations are valid until the next annual general meeting.
On September 10, Outotec announced that the board of directors has decided to
exercise its authorization. During the period September 18-24, 2012, Outotec
purchased a total of 500,000 of the company's own shares through public trading
at an average price of approximately EUR 38.55 per share. The total purchase
price paid for the shares was EUR 19,274,589.43. The acquired shares will be
used for the company's near-term incentive programs.
Third-party share-based incentive program agreement
Outotec has an agreement with a third-party service provider concerning the
administration of the share-based incentive program for key personnel. These
shares are accounted for as treasury shares on Outotec's consolidated balance
sheet. At the end of the reporting period, the amount of these treasury shares
was 64,327 (June 30, 2012: 64,327).
Other authorizations
The annual general meeting gave the board of directors the authority to donate
an aggregate amount of EUR 100,000 to for non-profit purposes or to
universities. The authorization is valid until December 31, 2012.
TRADING, MARKET CAPITALIZATION, AND SHAREHOLDERS
In the reporting period, the volume-weighted average price for a share in the
company was EUR 37.89, the highest quotation for a share was EUR 46.67, and the
lowest EUR 30.31. The trading of Outotec shares in the reporting period exceeded
72 million shares, with a total value of over EUR 2,731 million. At the end of
the reporting period, Outotec's market capitalization was EUR 1,692 million and
the last quotation for a share was EUR 36.95. At the end of the reporting
period, the company did not hold any treasury shares for trading purposes.
Outotec has consolidated Outotec Management Oy into the Group's balance sheet.
At the end of the reporting period, Outotec Management Oy held 203,434 or 0.44%
(October 25, 2012: 203,434) of Outotec shares, which have been accounted as
treasury shares in Outotec's balance sheet.
At the end of the reporting period, Outotec had 15,324 shareholders. Shares held
in 16 nominee registers accounted for 47.4% and Finnish households held 11.0% of
all Outotec shares.
Changes in share holdings
On April 18, 2012 the holdings of BlackRock, Inc (voting right held by BlackRock
Investment Management (UK) Limited) in shares of Outotec Oyj exceeded 5%
(2,311,857 shares), representing 5.05% of the shares and votes.
On March 6, 2012 the holdings of Solidium Oy in shares of Outotec Oyj exceeded
5% (2,314,000 shares), representing 5.05% of the shares and votes.
On March 1, 2012 the group holdings of Goldman Sachs Group, Inc. in shares of
Outotec Oyj exceeded 5% (2,458,638 shares), representing 5.37% of the shares and
votes and fell below 5% on March 2, 2012 (191,499 shares), representing 0.42% of
the shares and votes.
EVENTS AFTER THE REPORTING PERIOD
On October 16, 2012, Outotec announced that the following persons have been
nominated as members of the nomination board established in accordance with the
decision of the annual general meeting 2012: Kari A.J. Järvinen CEO (Solidium
Oy), Harri Sailas CEO (Ilmarinen Mutual Pension Insurance Company), and Poju
Zabludowicz CEO (Tamares Nordic Investments B.V.). The chairman of the board,
Carl-Gustaf Bergström, and the vice chairman of the board, Karri Kaitue, are
also members of the nomination board.
On October 3, 2012, Outotec announced it had acquired all the shares of Backfill
Specialists Pty Ltd, which is a technical consulting and engineering company
specialized in mine backfilling solutions mostly in Australia. Annual sales of
the company have been roughly EUR 18 million. The acquisition complements
Outotec's expertise in paste plants and enables the company to offer more
comprehensive tailings treatment solutions to the mining industry worldwide. The
acquisition price was not disclosed.
SHORT-TERM RISKS AND UNCERTAINTIES
Risks related to the global operating environment
Uncertainty in financial and banking markets has increased, which together with
potential further escalation of the sovereign debt crisis may have a negative
impact on the global economy and the investment decisions of Outotec's
customers. Outotec's global business operations are subject to various
political, economic, and social conditions. Conditions may rapidly change and
create delays and changes in order placement and execution as well as in the
availability and conditions of financing for mining companies. Political unrest
or trade restrictions may cause delays or even prevent project execution.
Risks related to Outotec's business
As part of its overall project delivery, Outotec often gives performance
guarantees and takes liabilities for the warranty period defects. Projects in
Outotec's order backlog may contain risks related to delivery, quality,
functionality or costs. Large turnkey projects may involve more risks for
example due to their complex scope, long delivery times, and contractual
liabilities. According to standard practice, all unfinished projects are
evaluated quarterly and provisions for performance guarantees and warranty
period guarantees are updated.
Sales negotiations, especially in large projects, may advance more slowly due to
their scope, permitting, and the complexity of financing packages. Outotec may
operate in politically unstable countries where potential economic sanctions and
possible future changes in the regulatory framework may have an adverse effect
on Outotec's business operations. In these cases, Outotec aims to mitigate
project contract risks through advance and milestone payments as well as gradual
booking of orders in backlog according to actual project progress.
Global economic uncertainty may reduce the demand for Outotec's products and
services. Outotec's gross margin fluctuates according to the product mix and the
timing of project execution. In particular, orders which include license fees
may have a major impact on the gross margin. Changes in labor costs, especially
when operating in high inflationary countries, as well as changes in raw
materials and subcontracting prices and component availability can also affect
Outotec's profitability.
Outotec follows the percentage of completion method for project revenue
recognition. Based on project time schedules, management estimates the revenues
to be recognized from the order backlog for the calendar year. As a result,
deviations in project time schedules may have an impact on the company's
financial projections.
The availability of skilled personnel is important for the growth of Outotec's
business. Especially in some fast growing market areas and challenging project
environments, personnel resourcing may be challenging. Business growth in line
with Outotec's strategy requires permanent increases in the workforce, raising
the company's fixed cost base and lowering cost structure adjustability.
The nature of international business, different interpretations of international
and local tax rules and regulations may cause additional direct or indirect
taxes for Outotec, thus reducing the company's net result.
Acquisitions are an integral part of Outotec's growth strategy. There is a risk
that the estimated synergy benefits will not materialize as planned. Goodwill
may be generated through acquisitions.
Outotec is involved in a few arbitral and court proceedings. Management expects
that these cases and their outcomes will have no material effect on Outotec's
financial result.
Financial risks
There is a risk that customers and suppliers may experience financial
difficulties and a lack of financing may result in project and payment delays or
bankruptcies, which can also result in losses for Outotec. These risks can be
reduced by advance and milestone payments as well as letters of credit or other
trade finance instruments.
Outotec's business model is primarily based on customer advance and milestone
payments and on-demand guarantees issued by Outotec's relationship banks.
Changes in advance payments received due to changes in business volume or the
industry's business practices may have an impact on the company's liquidity.
Securing the continuity of Outotec business operations requires that the company
has sufficient funding available under all circumstances. Cash held by the
company is primarily invested in short term bank deposits and in Finnish
corporate short term certificates of deposit.
More than 50% of Outotec's total cash flow is denominated in euros. The rest is
divided among various currencies, including the US dollar, Australian dollar,
Brazilian real, Canadian dollar, and South African rand. The weight of any given
currency in new projects can substantially fluctuate, but most cash-flow-related
risks are hedged over the short term and long term. In the short term, currency
fluctuations may create volatility in operating profit. The forecasted and
probable cash flows are selectively hedged and are always subject to separate
decisions and risk analysis. Natural hedging is used as widely as possible and
the remaining open foreign exchange exposures related to committed cash flows
are fully hedged using primarily forward agreements. The cost of hedging is
taken into account in project pricing.
The company is closely monitoring the developments in the EURO currency and has
internal policies for managing business in the potentially affected countries.
MARKET OUTLOOK
The long term outlook for metals demand is expected to remain good. Investments
in new production capacity, modernizations, and services will continue as
current production capacity and ongoing investments in new capacity are not
sufficient to fulfill the demand. Furthermore, the industry has to focus
increasingly on the social and environmental impacts of their operations,
increasing the need for advanced technologies. In addition, many countries are
developing new export regulations to increase their value capture from their
natural resources and promote domestic industries, consequently driving
investments in new greenfield capacity.
According to a number of large mining companies' announcements, their CAPEX
spending will remain at a high level going forward as continuous investments -
both greenfield and brownfield - are needed to address declining ore grades,
efficiency improvement requirements, tightening environmental regulations, and
higher operational costs. This is evidenced by the large number of mining and
metallurgical projects in different planning phases.
Financial resources continue to be available for solid projects and for
companies with strong cash flows and balance sheets. Export financing agencies
are also actively involved. In general, customer expectations for a return on
investments and performance are higher, supporting the need for more advanced
technologies. The potential escalation of macro-economic uncertainties may cause
Outotec's customers to delay their investment decisions.
In the Non-ferrous Solutions business area, the demand for copper, gold, zinc,
and silver technologies is expected to continue, and investment activity is seen
in the entire ore-to-metal technology value chain. The Services business is
expected to continue to grow driven by customers' high capacity utilization
rates and the old plant and equipment base requiring maintenance and
modernization. Competition for new projects remains tight and varies by market
and offering.
In the Ferrous Solutions business area, the demand for iron ore, ferroalloy and
ilmenite technologies is expected to continue. There is solid demand for
services, modernizations and smaller projects, but in the short term,
negotiations in large iron ore greenfield investments are expected to progress
slowly due to lower prices and uncertainty in China's steel demand, which is
impacting the outlook for the global iron ore value chain. The Middle East
continues to develop beneficiation, pelletizing, and ilmenite projects. There
are also additional opportunities for sustainable technologies in China due to
increased environmental awareness.
The Energy, Light Metals and Environmental Solutions business area continues to
see solid demand in alternative energy solutions as well as aluminum and
sulfuric acid technologies. The market for aluminum technologies is expected to
continue at a good level. Sulfuric acid technologies are needed in different
markets to replace old and inefficient processes as well as in the metals
production and fertilizer industry, which needs to meet the growing demand for
phosphate fertilizer. Furthermore, investments are driven by stricter
environmental regulations and the relocation of production capacity. Demand is
also growing in alternative energy-based solutions such as biomass and waste-to-
energy technologies. In addition, oil shale as well as oil sands technologies
are being developed. Investments in energy solutions are strategic investments,
and are thus often impacted by governmental regulations. The global market for
industrial water treatment solutions is growing.
The Services business is driven by the industry's capacity utilization rates,
long lifetime and performance improvements of processing plants as well as
increasingly challenging raw materials. Growth in the Services business is
achieved by further penetrating Outotec's large installed base and developing
new service offerings. Furthermore, the current high volume delivery of
Outotec's equipment and plant solutions results in new installed capacity
requiring lifecycle services. In addition to traditional service offerings, more
and more customers are interested in "operate and maintain" services due to the
lack of skilled employees, increasingly challenging raw materials and more
sophisticated processing technologies.
REVISED FINANCIAL GUIDANCE FOR 2012
Based on the first nine months' financial performance, strong order backlog at
the end of September, execution of CAPEX projects and market outlook, the
management expects that in 2012:
* sales will grow to approximately EUR 1.9-2.1 billion, especially driven by
the project revenue recognition, and
* operating profit margin from business operations will be approximately
9-10% (excluding one-time items and PPA amortizations).
Achieving the guidance is subject to the sales mix and relative share of
Services, fluctuation in foreign exchange rates, project progress in the order
backlog, timing of new orders, license fee income and project completions as
well as the general development of the world economy and financial markets.
PREVIOUS FINANCIAL GUIDANCE FOR 2012
Based on the first six months' financial performance, strong order backlog at
the end of June, market outlook and customer tendering activity, the management
expects that in 2012:
* sales will grow to approximately EUR 1.8-2.0 billion, especially driven by
the project revenue recognition, and
* operating profit margin from business operations will be approximately
9-10% (excluding one-time items and PPA amortizations).
Achieving the guidance is subject to the sales mix and relative share of
Services, fluctuation in foreign exchange rates, project progress in the order
backlog, timing of new orders, license fee income and project completions as
well as the general development of the world economy and financial markets.
Espoo, October 25, 2012
Outotec Oyj
Board of Directors
For further information, please contact:
Outotec Oyj
Pertti Korhonen, President and CEO
tel. +358 20 529 211
Mikko Puolakka, CFO
tel. +358 20 529 2002
Rita Uotila, Vice President - Investor Relations
tel. +358 20 529 2003, mobile +358 400 954141
Format for e-mail addresses: firstname.lastname@outotec.com
FINANCIAL REPORTING SCHEDULE IN 2013
* Financial Statements for 2012: February 7, 2013
* Interim Report for January-March 2013: April 26, 2013
* Interim Report for January-June 2013: July 31, 2013
* Interim Report for January-September 2013: October 30, 2013
The Annual General Meeting in 2013 is planned to be held on March 26, 2013.
INTERIM REPORT JANUARY-SEPTEMBER 2012 BRIEFING
Date: Thursday, October 25, 2012
Time: 2.00 pm (Finnish time)
Venue: Hotel Scandic Simonkenttä, Simonkatu 9, Helsinki
JOINING VIA WEBCAST
You may follow the briefing via a live webcast at www.outotec.com. The webcast
will be recorded and published on Outotec's website for on-demand viewing.
JOINING VIA TELECONFERENCE
You may also join the briefing by telephone. To register as a participant for
the teleconference and Q&A session, please dial 5 to 10 minutes before the
beginning of the event:
FI/UK: +44 20 7162 0025
US/CANADA: +1 334 323 6201
Password: 923569
In addition, an instant replay service of the conference call will be available
until midnight on October 28, 2012, using the following numbers:
FI/UK: +44 20 7031 4064
US: +1 954 334 0342
Access code: 923569
Contact information is gathered for registration purposes only and is not used
for commercial purposes.
INTERIM FINANCIAL STATEMENTS (unaudited)
Consolidated Statement of Comprehensive Q3 Q3 Q1-Q3 Q1-Q3 Q1-Q4
Income
EUR million 2012 2011 2012 2011 2011
-------------------------------------------------------------------------------
Sales 502.8 352.8 1,437.6 888.8 1,385.6
Cost of sales -405.9 -265.1 -1,145.8 -675.1 -1,053.1
-------------------------------------------------------------------------------
Gross profit 96.9 87.8 291.8 213.7 332.5
Other income 0.2 -2.4 0.5 2.9 3.9
Selling and marketing expenses -23.2 -21.5 -73.0 -63.1 -86.4
Administrative expenses -25.2 -23.2 -78.4 -67.3 -97.7
Research and development expenses -10.5 -7.5 -29.3 -22.7 -33.5
Other expenses 2.9 0.0 -2.0 -0.4 -6.7
Share of results of associated
companies -0.1 -0.0 -0.3 -0.1 -0.0
-------------------------------------------------------------------------------
Operating profit 41.0 33.2 109.4 63.0 111.9
Finance income and expenses
Interest income and expenses 1.2 1.8 4.3 4.1 6.0
Market price gains and losses -1.1 -0.7 -1.6 -1.4 -0.3
Other finance income and expenses -1.5 -1.0 -4.7 -3.2 -4.4
-------------------------------------------------------------------------------
Net finance income -1.4 0.1 -1.9 -0.5 1.4
Profit before income taxes 39.6 33.3 107.4 62.5 113.3
Income tax expenses -11.4 -11.4 -31.9 -20.2 -34.0
-------------------------------------------------------------------------------
Profit for the period 28.1 21.9 75.5 42.3 79.3
-------------------------------------------------------------------------------
Other comprehensive income
Exchange differences on translating
foreign operations 0.1 -6.1 4.8 -15.6 -3.9
Cash flow hedges 7.5 -2.4 6.7 -2.4 -4.3
Income tax relating to cash flow
hedges -1.9 0.7 -1.6 0.7 1.3
Available for sale financial assets 0.0 -0.1 -0.0 -0.2 -0.2
-------------------------------------------------------------------------------
Other comprehensive income for the
period 5.7 -7.9 9.9 -17.5 -7.2
Total comprehensive income for the
period 33.8 14.0 85.4 24.8 72.1
-------------------------------------------------------------------------------
Profit for the period attributable to:
Equity holders of the parent company 28.1 21.9 75.5 42.3 79.3
Non-controlling interest - - - - -
Total comprehensive income for the
period attributable to:
Equity holders of the parent company 33.8 14.0 85.4 24.8 72.1
Non-controlling interest - - - - -
Earnings per share for profit
attributable to the equity
holders of the parent company:
Basic earnings per share, EUR 0.62 0.48 1.66 0.93 1.75
Diluted earnings per share, EUR 0.62 0.48 1.66 0.93 1.75
All figures in the tables have been rounded and consequently the sum of
individual figures may deviate from the sum presented. Key figures have been
calculated using exact figures.
Condensed Consolidated Statement of September 30, September 30, December 31,
Financial Position
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
ASSETS
Non-current assets
Intangible assets 323.1 224.0 286.8
Property, plant and equipment 73.3 54.9 62.5
Deferred tax asset 49.2 42.9 47.3
Non-current financial assets
Interest-bearing 4.0 2.4 2.4
Non interest-bearing 2.0 1.3 2.5
-------------------------------------------------------------------------------
Total non-current assets 451.7 325.5 401.5
Current assets
Inventories *) 222.4 156.1 148.6
Current financial assets
Interest-bearing 0.0 0.1 0.7
Non interest-bearing 564.1 389.6 468.1
Cash and cash equivalents 364.3 423.9 402.5
-------------------------------------------------------------------------------
Total current assets 1,150.8 969.7 1,019.9
TOTAL ASSETS 1,602.5 1,295.2 1,421.4
-------------------------------------------------------------------------------
EQUITY AND LIABILITIES
Equity
Equity attributable to the equity 430.2 350.2 398.4
holders of the parent company
Non-controlling interest 1.2 1.0 1.1
-------------------------------------------------------------------------------
Total equity 431.4 351.2 399.5
Non-current liabilities
Interest-bearing 41.2 51.6 47.6
Non interest-bearing 97.6 102.9 107.0
-------------------------------------------------------------------------------
Total non-current liabilities 138.9 154.5 154.6
Current liabilities
Interest-bearing 25.7 18.2 18.9
Non interest-bearing
Advances received **) 424.6 401.0 399.0
Other non interest-bearing 581.8 370.4 449.4
liabilities
-------------------------------------------------------------------------------
Total current liabilities 1,032.1 789.5 867.3
Total liabilities 1,171.0 944.0 1,021.9
TOTAL EQUITY AND LIABILITIES 1,602.5 1,295.2 1,421.4
-------------------------------------------------------------------------------
*) Of which advances paid for inventories amounted to EUR 63.1 million at
September 30, 2012 (September 30, 2011: EUR 38.9 million, December 31, 2011: EUR
43.5 million).
**) Gross advances received before percentage of completion revenue recognition
amounted to EUR 1,692.8 million at September 30, 2012 (September 30, 2011: EUR
1,416.4 million, December 31, 2011: EUR 1,462.3 million).
Condensed Consolidated Statement of Cash Flows Q1-Q3 Q1-Q3 Q1-Q4
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Cash flows from operating activities
Profit for the period 75.5 42.3 79.3
Adjustments for
Depreciation and amortization 22.9 14.0 19.4
Other adjustments 38.2 17.5 28.6
Increase (-), decrease (+) in working capital -29.7 160.1 134.4
Interest received 5.9 5.6 8.0
Interest paid -1.4 -1.2 -2.0
Income tax paid -31.1 -12.5 -20.8
-------------------------------------------------------------------------------
Net cash from operating activities 80.4 225.8 247.0
Purchases of assets -31.5 -22.0 -34.4
Acquisition of subsidiaries and business operations, net of -29.1 - -34.5
cash
Acquisition of shares in associated companies - - -0.1
Proceeds from disposal of subsidiaries - - 0.0
Proceeds from sale of assets 0.3 0.5 1.4
Change in other investing activities -0.1 -0.0 -0.1
-------------------------------------------------------------------------------
Net cash used in investing activities -60.3 -21.5 -67.7
Cash flow before financing activities 20.0 204.3 179.3
Repayments of non-current debt -4.9 -6.9 -11.5
Decrease in current debt -2.3 -6.1 -4.9
Increase in current debt 4.9 1.4 0.0
Purchase of treasury shares -19.3 - -
Related party net investment to Outotec Oyj shares *) -0.2 - -0.2
Dividends paid -38.9 -34.3 -34.3
Change in other financing activities 1.0 0.5 0.4
-------------------------------------------------------------------------------
Net cash used in financing activities -59.6 -45.4 -50.6
Net change in cash and cash equivalents -39.6 158.9 128.8
Cash and cash equivalents at the beginning of the period 402.5 280.3 280.3
Foreign exchange rate effect on cash and cash equivalents 1.4 -15.3 -6.6
Net change in cash and cash equivalents -39.6 158.9 128.8
-------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 364.3 423.9 402.5
-------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
203,434 (December 31, 2011: 199,747) Outotec shares which have been accounted
for as treasury shares in Outotec's consolidated statement of financial
position.
Consolidated Statement of Changes in Equity
A = Share capital
B = Share premium fund
C = Other reserves
D = Fair value reserves
E = Treasury shares
F = Reserve for invested non-restricted equity
G = Cumulative translation differences
H = Retained earnings
I = Non-controlling interest
J = Total equity
Consolidated Statement of Changes in Equity
-------------------------------------------------
Attributable to the equity holders of the
parent company
-------------------------------------------------
EUR million A B C D E F G H I J
-------------------------------------------------------------------------------
Equity at
January 1, 2011 17.2 20.2 0.4 2.1 -9.7 87.7 29.0 210.0 1.0 357.7
-------------------------------------------------------------------------------
Dividends paid - - - - - - - -34.3 - -34.3
Management incentive
plan for Outotec
Executive Board *) - - - - - - - - 0.0 0.0
Share-based
compensation - - - - 2.4 - - -0.1 - 2.3
Total comprehensive
income for the
period - - - -1.8 - - -15.6 42.3 - 24.8
Other changes - - 0.0 - - - - 0.6 - 0.6
-------------------------------------------------------------------------------
Equity at
September 30, 2011 17.2 20.2 0.4 0.2 -7.3 87.7 13.3 218.4 1.0 351.2
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Equity at
January 1, 2012 17.2 20.2 0.4 -1.2 -7.5 87.7 25.1 256.5 1.1 399.5
-------------------------------------------------------------------------------
Dividends - - - - - - - -38.9 - -38.9
Management incentive
plan for Outotec
Executive Board *) - - - - -0.2 - - - 0.1 -0.1
Purchase of treasury
shares - - - - -19.3 - - - - -19.3
Share-based
compensation - - - - 1.5 - - 3.0 - 4.5
Total comprehensive
income for the
period - - - 5.1 - - 4.8 75.5 - 85.4
Other changes - - 0.0 - - - - 0.4 - 0.4
-------------------------------------------------------------------------------
Equity at
September 30, 2012 17.2 20.2 0.5 3.9 -25.5 87.7 29.9 296.5 1.2 431.4
-------------------------------------------------------------------------------
*) Consolidation of Outotec Management Oy (incentive plan for Outotec executive
board members). At the end of the reporting period, Outotec Management Oy held
203,434 (December 31, 2011: 199,747) Outotec shares which have been accounted
for as treasury shares in Outotec's consolidated statement of financial
position.
Key figures Q3 Q3 Q1-Q3 Q1-Q3 Last 12 Q1-Q4
2012 2011 2012 2011 months 2011
-------------------------------------------------------------------------------
Sales, EUR million 502.8 352.8 1,437.6 888.8 1,934.4 1,385.6
Gross margin, % 19.3 24.9 20.3 24.0 21.2 24.0
Operating profit, EUR million 41.0 33.2 109.4 63.0 158.3 111.9
Operating profit margin, % 8.1 9.4 7.6 7.1 8.2 8.1
Profit before taxes, EUR
million 39.6 33.3 107.4 62.5 158.2 113.3
Profit before taxes in
relation to sales, % 7.9 9.4 7.5 7.0 8.2 8.2
Net cash from operating
activities, EUR million 13.4 120.1 80.4 225.8 101.6 247.0
Net interest-bearing debt at
the
end of period, EUR million -301.4 -356.7 -301.4 -356.7 -301.4 -339.1
Gearing at the end of period,
% -69.8 -101.6 -69.8 -101.6 -69.8 -84.9
Equity-to-assets ratio at the
end of period, % 36.6 39.3 36.6 39.3 36.6 39.1
Working capital at the end of
period, EUR million -244.4 -269.6 -244.4 -269.6 -244.4 -270.3
Capital expenditure, EUR
million 14.4 8.5 48.4 23.4 123.4 98.3
Capital expenditure in
relation to sales, % 2.9 2.4 3.4 2.6 6.4 7.1
Return on investment, % 34.3 34.6 31.0 21.8 35.1 26.4
Return on equity, % 26.6 25.5 24.2 15.9 28.7 20.9
Order backlog at the end of
period, EUR million 2,155.8 2,052.5 2,155.8 2,052.5 2,155.8 1,985.1
Order intake, EUR million 452.4 802.7 1,613.2 1,678.4 1,940.2 2,005.4
Personnel, average for the
period 4,663 3,610 4,356 3,420 4,218 3,516
Profit for the period in
relation to sales, % 5.6 6.2 5.3 4.8 5.8 5.7
Research and development
expenses, EUR million 10.5 7.5 29.3 22.7 40.1 33.5
Research and development
expenses
in relation to sales, % 2.1 2.1 2.0 2.6 2.1 2.4
Earnings per share, EUR 0.62 0.48 1.66 0.93 2.48 1.75
Equity per share, EUR 9.56 7.71 9.56 7.71 9.56 8.75
-------------------------------------------------------------------------------
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME AND FINANCIAL POSITION
Outotec has applied the following revised or new standards and interpretations
since the beginning of 2012, which do not have a material impact on the Group's
financial statements:
* IFRS 7 - Financial Instruments, Disclosures - Transfer of Financial Assets
(Amendment to IFRS 7). The amendment introduces new disclosure requirements
concerning the transfer of financial assets in two cases; financial assets
that are not derecognized in their entirety, and financial assets that are
derecognized in their entirety but for which the entity retains continuing
involvement. This amendment will promote transparency and improve
understanding of the risk exposures relating to transfers of financial
assets. Currently, Outotec Group does not have such transferred financial
assets and thus the amendment does not impact on the published information.
* IAS 12 - Income taxes, Deferred tax - Deferred tax accounting for investment
property at fair value (Amendment to IAS 12). The amendment introduces an
exception to the existing principle for the measurement of deferred tax
assets or liabilities arising on investment property measured at fair value
according to IAS 40 (Investment property). Outotec Group does not currently
have investment properties measured using the fair value model in IAS 40 and
thus the amendment does not impact on the published information.
Use of estimates
IFRS requires management to make estimates and assumptions which affect the
reported amounts of assets and liabilities as well as the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of income and expenses during the reporting period.
Accounting estimates are employed in the financial statements to determine
reported amounts, including the realisability of certain assets, the useful
lives of tangible and intangible assets, income taxes, provisions, pension
obligations and impairment of goodwill. These estimates are based on the
management's best knowledge of current events and actions; however, it is
possible that the actual results may differ from the estimates used in the
financial statements.
Major Non-Recurring Items in Operating Profit Q1-Q3 Q1-Q3 Q1-Q4
EUR million 2012 2011 2011
------------------------------------------------------------------------
One-time costs related to reorganization of business - - -3.7
One-time income related to reorganization of business - - 1.1
Costs related to acquisitions -1.3 - -2.0
------------------------------------------------------------------------
Income Tax Expenses Q1-Q3 Q1-Q3 Q1-Q4
EUR million 2012 2011 2011
--------------------------------------------
Current taxes -45.6 -22.3 -33.5
Deferred taxes 13.6 2.1 -0.5
--------------------------------------------
Total income tax expenses -31.9 -20.2 -34.0
Property, Plant and Equipment September 30, September 30, December 31,
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Historical cost at the beginning of 144.8 128.9 128.9
the period
Translation differences 1.3 -2.4 -0.5
Additions 15.9 10.9 17.9
Disposals -1.0 -1.4 -4.5
Acquired subsidiaries 4.5 - 3.5
Reclassifications -1.4 -0.6 -0.6
-------------------------------------------------------------------------------
Historical cost at the end of the 163.9 135.4 144.8
period
Accumulated depreciation and -82.2 -76.2 -76.2
impairment at the beginning of the
period
Translation differences -0.6 1.3 0.2
Disposals 0.8 1.1 3.4
Reclassifications 0.1 -0.1 -0.3
Depreciation during the period -8.6 -6.6 -9.5
-------------------------------------------------------------------------------
Accumulated depreciation and -90.5 -80.5 -82.2
impairment at the end of the period
Carrying value at the end of the 73.3 54.9 62.5
period
-------------------------------------------------------------------------------
Commitments and Contingent September 30, September 30, December 31,
Liabilities
EUR million 2012 2011 2011
-------------------------------------------------------------------------------
Pledges and mortgages 0.2 0.0 0.0
Guarantees for commercial commitments 269.8 206.8 209.1
Minimum future lease payments on operating 152.7 71.6 161.3
leases
-------------------------------------------------------------------------------
The pledges and mortgages are used to secure credit facilities in Numcore Ltd.
The above value of commercial guarantees does not include advance payment
guarantees issued by the parent or other group companies. The total amount of
guarantees for financing issued by group companies amounted to EUR 28.5 million
at September 30, 2012 (September 30, 2011: EUR 28.1 million, December 31, 2011:
EUR 25.8 million) and for commercial guarantees including advance payment
guarantees EUR 568.6 million at September 30, 2012 (September 30, 2011: EUR
450.7 million, December 31, 2011: EUR 477.1 million).
Derivative Instruments
Currency Forwards September 30, September 30, December 31,
EUR million 2012 2011 2011
----------------------------------------------------------------
Fair values, net 4.2 *) -7.9 **) -9.6 ***)
Nominal values 799.0 483.7 545.4
----------------------------------------------------------------
*) of which EUR 4.9 million designated as cash flow hedges.
**) of which EUR -2.2 million designated as cash flow hedges.
***) of which EUR -3.6 million designated as cash flow hedges.
Related Party Transactions
Balances with Key Management
-----------------------------
Outotec's board of directors granted to Outotec Management Oy an interest-
bearing loan for the maximum amount of EUR 5.0 million to finance the
acquisition of the Outotec shares. The amount of the outstanding loan was EUR
4.4 million at September 30, 2012 (December 31, 2011: EUR 4.3 million).
Outotec Oyj paid to Outotec Management Oy dividends amounting to EUR 0.2 million
in April 2012 (EUR 0.1 million in April 2011).
Transactions and Balances with Associated Companies Q1-Q3 Q1-Q3 Q1-Q4
EUR million 2012 2011 2011
----------------------------------------------------------------------
Sales - 0.0 0.0
Other income 0.0 0.0 0.6
Purchases -0.4 -0.3 -0.3
Trade and other receivables 0.5 0.5 0.3
Current liabilities 2.1 0.1 0.6
Loan receivables 1.6 0.2 0.6
----------------------------------------------------------------------
Business Combinations
----------------------
Numcore Ltd
Outotec has acquired Numcore Ltd in Kuopio, Finland. Numcore is a company
developing and marketing innovative online process control solutions based on
3D imaging. The acquisition was completed on March 12, 2012. This acquisition
supports Outotec's growth strategy and strengthens Outotec's competitive edge in
providing advanced technology solutions. Numcore's technology is already proven
in flotation and thickener applications. Furthermore, EIT technology can be
utilized in Outotec's other business segments.
The purchase price has been allocated to technologies. The remaining goodwill of
EUR 4.5 million is mainly based on Numcore's experienced personnel and synergy
benefits.
Demil Manutenção Industrial Ltda
Outotec has acquired Demil Manutenção Industrial Ltda in Brazil. Demil provides
industrial maintenance services for iron ore pelletizing plants and is located
in Guarapari, Espírito Santo in Brazil.
Demil has approximately 300 employees and its annual sales are at the level of
EUR 10 million. The acquisition will provide a platform for further developing
Outotec's service business and capabilities in Brazil. Demil's services can be
offered to Outotec's Brazilian customers, pelletizing technology users in
particular.
The purchase price has been allocated mainly to customer relationships. The
remaining goodwill of EUR 4.5 million is mainly based on the synergy benefits of
the customer relationship.
TME Group
Outotec has acquired Australian-owned TME Group. TME is a mining services
company with offices throughout Australia and in South Africa. TME provides
grinding mill relining and mineral processing plant maintenance services to
customers mainly in Australia, Africa, and South East Asia.
With annual sales of approximately EUR 35 million, TME has 130 permanent
employees and a large casual labor workforce.
The purchase price has been allocated mainly to customer relationships. The
remaining goodwill of EUR 14.9 million is mainly based on TME's experienced
personnel and synergy benefits.
Segments' Sales and Operating Profit by Quarters
EUR million Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12
-------------------------------------------------------------------------------
Sales
Non-ferrous Solutions 144.6 223.9 162.0 191.4 235.5 358.8 260.7 335.9 312.5
Ferrous Solutions 35.5 43.2 43.6 42.6 60.0 74.8 70.0 81.8 92.9
Energy, Light Metals and 50.3 65.3 46.1 57.7 61.4 70.9 85.9 106.8 100.1
Environmental Solutions
Unallocated items *) and -1.8 -2.2 -4.1 -3.4 -4.1 -7.7 -6.2 0.0 -2.7
intra-group sales
-------------------------------------------------------------------------------
Total 228.5 330.3 247.5 288.4 352.8 496.8 410.4 524.4 502.8
Operating profit
Non-ferrous Solutions 13.5 23.2 18.1 12.6 24.6 52.4 25.4 35.0 33.7
Ferrous Solutions 4.2 8.2 3.2 -1.9 6.0 -0.6 5.5 2.2 9.9
Energy, Light Metals and 3.5 11.4 3.3 5.2 11.7 3.6 3.8 7.3 0.6
Environmental Solutions
Unallocated **) and -3.1 -14.7 -5.7 -5.0 -9.1 -6.5 -7.2 -3.6 -3.2
intra-group items
-------------------------------------------------------------------------------
Total 18.1 28.1 19.0 10.9 33.2 48.9 27.6 40.8 41.0
*) Unallocated items primarily include invoicing of group management and
administrative services.
**) Unallocated items primarily include group management and administrative
services
Definitions for Key Financial Figures
-------------------------------------------------------------------------------
Net interest-bearing debt = Interest-bearing debt - interest-
bearing assets
Gearing = Net interest-bearing debt × 100
--------------------------------------
Total equity
Equity-to-assets ratio = Total equity × 100
--------------------------------------
Total assets - advances received
Return on investment = Operating profit + finance income × 100
--------------------------------------
Total assets - non interest-bearing
debt (average for the period)
Return on equity = Profit for the period × 100
--------------------------------------
Total equity (average for the
period)
Research and development expenses = Research and development expenses in
the statement of comprehensive
income
(including expenses covered by
grants received)
Earnings per share = Profit for the period attributable
to the equity holders of the parent
company
--------------------------------------
Average number of shares during the
period, as adjusted for stock split
Dividend per share = Dividend for the financial year
--------------------------------------
Number of shares at the end of the
period, as adjusted for stock split
DISTRIBUTION:
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